Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 355.480

Notional deductions for earlier year associate expenditure

             (1)  An * R&D entity can deduct for an income year (the present year ) expenditure it incurred to its * associate during an earlier income year to the extent that:

                     (a)  the expenditure was incurred on one or more * R&D activities:

                              (i)  for which the R&D entity is registered under section 27A of the Industry Research and Development Act 1986 for an income year; and

                             (ii)  that are activities to which section 355- 210 (conditions for R&D activities) applies; and

                     (b)  the expenditure is paid to that associate during the present year; and

                     (c)  subsection (2) applies to the expenditure.

Note 1:       This section applies in a modified way to R&D partnership expenditure (see sections 355- 510 and 355- 515).

Note 2:       Expenditure paid in income years starting on or after 1 July 2011 may be deductible for activities registered for income years starting before 1 July 2011 (see section 355-200 of the Income Tax (Transitional Provisions) Act 1997 ).

Expenditure cannot have been otherwise deducted etc.

             (2)  This subsection applies to the expenditure if:

                     (a)  the * R&D entity can deduct the expenditure, or is entitled to a * tax offset for the expenditure, under any other Division of this Act for an earlier income year; and

                     (b)  by the time of lodging its * income tax return for the most recent income year before the present year, the R&D entity had neither:

                              (i)  deducted the expenditure; nor

                             (ii)  obtained a tax offset for the expenditure;

                            as described in paragraph (a).

             (3)  The entitlement to the deduction, or * tax offset, described in paragraph (2)(a) ceases to the extent that subsection (2) applies to the expenditure.

Example:    If, by the time mentioned in paragraph (2)(b), an R&D entity chose to deduct only a third of the expenditure it could have deducted under another Division, then the remaining 2 thirds of that expenditure:

(a)    can be deducted under this section; but

(b)    can no longer be deducted under the other Division.

Notional deduction is subject to integrity rules etc.

             (4)  This section has effect subject to section 355- 225 (excluded expenditure), Subdivision 355-F (integrity rules) and subsection 355-580(3) (CRC contributions).

Table of sections

355-500    What this Subdivision is about

355-505    Meaning of R&D partnership and partner's proportion

355-510    R&D partnership expenditure on R&D activities

355-515    R&D activities conducted by or for an R&D partnership

355-520    When notional deductions arise for decline in value of depreciating assets of R&D partnerships

355-525    Balancing adjustments for R&D partnership assets only used for R&D activities

355-530    Implications for partner's aggregated turnover

355-535    Disposal of R&D results--assets of R&D partnerships

355-540    Application of recoupment rules

355-545    Relevance for net income, and losses, of the R&D partnership